EIRCOM PLC

eircom Group plc

Quarterly results announcement

30 June 2006

QUARTERLY RESULTS ANNOUNCEMENT

TO 30 JUNE 2006

HIGHLIGHTS FOR THE QUARTER

Revenue of €483 million (compared to €399 million in the corresponding quarter in the prior year).

EBITDA before restructuring programme costs, non-cash pension (credit)/charge and profit on disposal of property and investments, of €162 million, resulting in an EBITDA margin on the same basis of 34% compared to 37% in the corresponding quarter in the prior year. The reduction is due to the change in mix following the acquisition of Meteor.

€74 million of capex cash outflow in the quarter, with a focus on increasing capacity, demand led growth, DSL roll-out and capex relating to Meteor.

DSL customers increased to 260,000 at 30 June 2006 and to 274,000 customers as of 27 July 2006.

Meteor EBITDA of €13 million for the quarter ended 30 June 2006, in line with expectations. Total mobile subscribers of 683,000 as at 30 June 2006, and increased to 700,000 at the end of July 2006.

Adjusted EPS for the quarter ended 30 June 2006 is 4 cent compared to 3 cent in the corresponding quarter in the prior year. Adjusted EPS excludes:

the profit on disposal of property and investments and

the additional finance costs due to the anticipated early repayment of debt.

Loss of 10 cent per share for the quarter ended 30 June 2006 compared to EPS of 7 cent in the corresponding quarter in the prior year.

Second interim dividend of 5.2 cents in respect of the year ended 31 March 2006 paid on 26 June 2006.

Commenting on the results, eircom Chief Executive, Dr Philip Nolan said:

As we publish these results, our shareholders have voted overwhelmingly in favour of the offer recommended by the Board and these are the final set of results under the current Board. The results show a strong performance across the business with revenue and EBITDA growth in both fixed line and mobile segments. With over 274,000 DSL customers and over 700,000 mobile subscribers, the company has developed a strong platform on which to build its future. My management team and the employees of eircom have performed outstandingly to deliver on what we promised. In that we have been ably supported by a first class Board. It has been a great privilege to lead the Company through this transformational period and I would like to thank all eircom’s employees for their hard work and commitment.

4 August 2006

Financial Highlights

	Quarter ended 30 June 2005	Quarter ended 30 June 2006	% Change¹
	€’m	€’m

Revenue	399	483	21
EBITDAbefore restructuring programme costs, non-cash pension charge/(credit) and profit on disposal of property and investments	149	162	9
Operating profit before restructuring programme costs, non-cash pension charge/(credit) and profit on disposal of property and investments	80	82	3
Group operating profit	112	81	(28)

Operational Highlights

	Quarter ended 30 June 2005	Quarter ended 30 June 2006	% Change²
Total access channels (thousands)	2,125	2,242	6
Retail traffic minutes (millions)	2,721	2,596	(5)
Wholesale interconnect minutes (millions)	2,257	2,427	8
Period-end headcount for fixed line services (excluding agency)	7,263	7,071	(3)
Period-end headcount for mobile services (excluding agency)	-	621	n/a
Total mobile subscribers (thousands)	-	683	n/a

Key Ratios

	Quarter ended 30 June 2005 %	Quarter ended 30 June 2006 %
EBITDA margin before restructuring programme costs, non-cash pension charge/(credit) and profit on disposal of property and investments	37	34
Operating profit margin before restructuring programme costs, non-cash pension charge/(credit) and profit on disposal of property and investments	20	17
Operating profit margin	28	17

Reconciliation of earnings before interest, taxation, depreciation, amortisation, restructuring programme costs, non-cash pension charge/(credit) and profit on disposal of property and investments to operating profit

	Quarter ended 30 June 2005	Quarter ended 30 June 2006
	€’m	€’m

Operating profit	112	81
Profit on disposal of property and investments	(46)	-
Restructuring programme costs	-	3
Non-cash pension charge/(credit)	14	(2)
Operating profit before restructuring programme costs, non-cash pension charge/(credit) and profit on disposal of property and investments	80	82
Depreciation	66	73
Amortisation	3	7
EBITDA before restructuring programme costs, non-cash pension charge/(credit) and profit on disposal of property and investments	149	162

Adjusted earnings per share attributable to the equity holders of the group during the period

	Quarter ended 30 June 2005	Quarter ended 30 June 2006
	€’m	€’m

Profit/(loss) attributable to equity holders of the company	60	(108)
Profit on disposal of property and investments (net of taxation)	(37)	-
Finance costs adjustment	-	156
Adjusted profit attributable to equity holders of the company	23	48

Weighted average number of shares in issue	830,192,710	1,073,502,571

Earnings/(loss) per share attributable to the equity holders of the group during the period	0.07	(0.10)
Earnings per share attributable to profit on disposal of property and investments (net of taxation)	(0.04)	-
Loss per share attributable to finance costs	-	0.14
Adjusted earnings per share attributable to the equity holders of the group during the period	0.03	0.04

Consolidated Income Statement - unaudited

For the Quarter ended 30 June 2006


	Notes	2005	2006
		€’m	€’m

Revenue	3	399	483

Operating costs excluding amortisation, depreciation and restructuring programme costs		(264)	(319)
Amortisation		(3)	(7)
Depreciation		(66)	(73)
Restructuring programme costs		-	(3)

Profit on disposal of property and investments		46	-
Operating profit	3	112	81

Finance costs		(37)	(193)
Finance income		2	12
Finance costs – net	4	(35)	(181)

Profit/(loss) before tax		77	(100)

Income tax charge	5	(17)	(8)

Profit/(loss) for the quarter		60	(108)

Earnings/(loss) per share attributable to the equity holders of the group during the period
- Basic	6	0.07	(0.10)
- Diluted	6	0.07	(0.10)

The accompanying notes form an integral part of the condensed interim financial information.

Consolidated Balance Sheet - unaudited

As at 30 June 2006

	Notes	31 March	30 June
		2006	2006
		€’m	€’m
Assets
Non-current assets
Goodwill		903	903
Other intangible assets		141	139
Property, plant and equipment		2,049	2,043
Retirement benefit asset		134	136
Financial assets at fair value through income statement		53	51
Other assets		105	100
		3,385	3,372

Current assets
Inventories		13	14
Trade and other receivables		351	376
Financial assets at fair value through income statement		17	18
Derivative financial instruments		2	3
Other assets		25	23
Cash and cash equivalents		411	406
		819	840
Total assets		4,204	4,212

Liabilities
Non-current liabilities
Borrowings	9	2,272	104
Derivative financial instruments		39	-
Capital grants		7	7
Deferred tax liabilities		205	200
Provisions for other liabilities and charges	10	188	181
		2,711	492

Current liabilities
Borrowings	9	195	2,485
Derivative financial instruments		-	50
Trade and other payables		651	671
Current tax liabilities		19	32
Provisions for other liabilities and charges	10	37	35
		902	3,273
Total liabilities		3,613	3,765

Equity
Equity share capital		120	120
Share premium account		208	208
Capital redemption reserve		35	35
Group merger reserve		100	100
Other reserves		380	380
Cash flow hedging reserve		(18)	-
Retained loss		(234)	(396)
Total equity		591	447

Total liabilities and equity		4,204	4,212

The accompanying notes form an integral part of the condensed interim financial information.

Consolidated cash flow statement - unaudited

For the Quarter Ended 30 June 2006

	Note	2005	2006
		€’m	€’m

Cash flows from operating activities
Cash generated from operations	11	146	130
Interest received		2	3
Interest paid		(11)	(12)
Income tax refund		2	-
Net cash generated from operating activities		139	121

Cash flows from investing activities
Purchase of property, plant and equipment (PPE)		(59)	(74)
Proceeds from sale of PPE and investments		1	-
Purchase of intangible assets		(1)	(2)
Net cash used in investing activities		(59)	(76)

Cash flows from financing activities
Dividends paid to equity shareholders		-	(49)
Lease payments		-	(1)
Net cash used in financing activities		-	(50)

Net increase/ (decrease) in cash and cash equivalents		80	(5)
Cash and cash equivalents at beginning of period		388	411
Cash and cash equivalents at end of period		468	406

The accompanying notes form an integral part of the condensed interim financial information.

Consolidated statement of changes in shareholders’ equity - unaudited

	Equity share capital	Other equity share capital	Share premium account	Capital redemption reserve	Group merger reserve	Other reserves	Cash flow hedging reserve	Retained loss	Total equity
	€’m	€’m	€’m	€’m	€’m	€’m	€’m	€’m	€’m

Balance at 31 March 2005	75	86	218	35	180	-	-	(219)	375

Effect of adoption of IAS 32 & IAS 39	6	(86)	-	-	(80)	-	(25)	-	(185)
Balance at 1 April 2005	81	-	218	35	100	-	(25)	(219)	190

Cash flow hedges, net of tax	-	-	-	-	-	-	(1)	-	(1)
Net expense recognised directly in equity	-	-	-	-	-	-	(1)	-	(1)
Profit for period	-	-	-	-	-	-	-	60	60
Total recognised income for the period	-	-	-	-	-	-	(1)	60	59

Balance at 30 June 2005	81	-	218	35	100		(26)	(159)	249


Balance at 31 March 2006	120	-	208	35	100	380	(18)	(234)	591

Transfer cash flow hedge to group income statement	-	-	-	-	-	-	18	-	18
Loss for period	-	-	-	-	-	-	-	(108)	(108)
Total recognised income for the period	-	-	-	-	-	-	18	(108)	(90)

Share option scheme	-	-	-	-	-	-	-	2	2
Dividends relating to ordinary shareholders	-	-	-	-	-	-	-	(56)	(56)

Balance at 30 June 2006	120	-	208	35	100	380	-	(396)	447

The accompanying notes form an integral part of the condensed interim financial information.

Selected notes to the condensed consolidated financial information – unaudited

1. General information

eircom Group plc is a UK registered plc and is a provider of fixed line and mobile telecommunications services in Ireland. The group is tax resident in Ireland. The address of its registered office is 1 Park Row, Leeds, LS1 5AB, United Kingdom.

The company is listed on the Irish and London Stock Exchanges.

This condensed consolidated interim financial information was approved, for issue on 4 August 2006.

2. Basis of preparation

This condensed interim financial information has been prepared using the same accounting policies and method of computation as for the year ended 31 March 2006 and has been prepared in accordance with IAS 34 "Interim Financial Reporting". This condensed interim financial information has been prepared on the going concern basis. For further discussion of going concern, please see note 9. For a more complete discussion of our significant accounting policies and other information, this report should be read in conjunction with the Annual Report and financial statements of eircom Group plc for the year ended 31 March 2006.

This condensed interim financial information does not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985. The statutory accounts for the financial year ended 31 March 2006 were approved by the Board of Directors on 2 June 2006 and have been filed with the Registrar. The auditors have reported on the statutory accounts for the financial year ended 31 March 2006. The audit report on eircom Group plc statutory accounts for the financial year ended 31 March 2006 was not qualified nor did it contain an emphasis of matter paragraph or a statement under either s327(2) (inadequate books and records) or s237(3) (inadequate information or explanations received by the auditor) of the Companies Act 1985.

3. Segment information

The group provides communications services, principally in Ireland. The group is organised into two main business segments:

(a) Fixed line; and

(b) Mobile

The segment results for the quarter ended 30 June 2006 are as follows:

	Fixed line €’m	Mobile €’m	Inter-segment €’m	Group €’m

Revenue	415	80	(12)	483

Operating profit / Segment result	81	-	-	81

The segment results for the quarter ended 30 June 2005 are as follows:

	Fixed line €’m	Mobile €’m	Inter-segment €’m	Group €’m

Revenue	399	-	-	399

Operating profit / Segment result	112	-	-	112

4. Finance costs – net

	Quarter ended	Quarter ended
	30 June	30 June
	2005 €’m	2006 €’m

Finance costs	(37)	(193)
Finance income	2	12
Finance costs - net	(35)	(181)

In the quarter ended 30 June 2006, costs of €156 million due to the group refinancing are included in finance costs. This reflects the change in expected life of financial instruments and premium payable on the early repayment of senior notes and senior subordinated notes. The cost also includes €19 million to reflect the fair value of derivatives, this amount is inclusive of €18 million previously recognised in reserves as the hedges are no longer considered to be effective.

The expected payment date in respect of our loans, senior notes, senior subordinated notes and preference shares is in August 2006.

Selected notes to the condensed consolidated financial information – unaudited (continued)

5. Income tax charge
Reconciliation of effective tax rate

The tax on the group’s profit/(loss) before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated companies as follows: -

	Quarter ended	Quarter ended
	30 June	30 June
	2005 €’m	2006 €’m

Profit/(loss) before tax	77	(100)

Tax calculated at Irish standard tax rate of 12.5%	10	(12)

Effects of:-
Non deductible expenses	1	22
Income taxable at higher rate	6	-
Adjustment in respect of prior periods	-	(2)
Tax charge for the quarter	17	8

6. Earnings/(loss) per share
Basic earnings/(loss) per share

Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the period, excluding ordinary shares purchased by the company and held as treasury shares, if any.

	Quarter ended	Quarter ended
	30 June	30 June
	2005	2006
	€’m	€’m

Profit/(loss) attributable to equity holders of the company	60	(108)

Weighted average number of ordinary shares in issue	830,192,710	1,073,502,571

Basic earnings/(loss) per share (€ per share)	0.07	(0.10)

Diluted earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The company has two categories of potentially dilutive ordinary shares: convertible preference shares and share options. The convertible preference shares and share options are not dilutive for the quarter ended 30 June 2006.

The convertible preference shares and share options were dilutive for the quarter ended 30 June 2005. The convertible preference shares for the prior year quarter ended 30 June 2005 was assumed to have been converted into ordinary shares at the period-end market share price. The net profit is adjusted to eliminate the interest expense less the tax effect. For the share options a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average market share price of the company’s shares for the period) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

	Quarter ended	Quarter ended
	30 June	30 June
	2005	2006
	€’m	€’m

Profit/(loss) attributable to equity holders of the company	60	(108)
Interest expense on convertible debt (net of tax)	5	-
Profit/(loss) used to determine diluted earnings per share	65	(108)

Weighted average number of ordinary shares in issue	830,192,710	1,073,502,571
Adjustment for
– assumed conversion of convertible preference shares	95,078,786	-
– share options	3,429,919	-
Weighted average number of ordinary shares for diluted earnings per share	928,701,415	1,073,502,571
Diluted earnings/(loss) per share (€ per share)	0.07	(0.10)

Selected notes to the condensed consolidated financial information – unaudited (continued)

7. Dividends

A second interim dividend of €0.052 per share that relates to the financial year ended 31 March 2006 amounting to €56 million was declared and paid on 26 June 2006.

8. Trade and other receivables

The group has recognised a provision of €4 million (30 June 2005: €2 million) for the impairment of its trade receivables during the quarter ended 30 June 2006. The group reversed provisions for impaired receivables of €Nil (30 June 2005: €2 million) during the quarter ended 30 June 2006. The group has used provision for impaired receivables of €6 million (30 June 2005: €1 million) during the quarter ended 30 June 2006. The creation and reversal of provisions for impaired receivables have been included in "operating costs" in the income statement.

9. Borrowings

The maturity profile of the carrying amount of the group’s borrowings is set out below.

	Within 1 Year	Between 1 & 2 Years	Between 2 & 5 Years	After 5 Years	Total
	€’m	€’m	€’m	€’m	€’m
As at 31 March 2006
Loans	140	140	900	-	1,180
7.25% Senior notes due 2013 (listed)	-	-	-	550	550
8.25% Senior subordinated notes due 2013 (listed)	-	-	-	491	491
Debt issue costs	(2)	(2)	(1)	(31)	(36)
Convertible preference shares	29	29	72	14	144
Finance leases - defeased	25	36	69	-	130
Finance leases	3	5	-	-	8
	195	208	1,040	1,024	2,467

As at 30 June 2006
Loans	1,180	-	-	-	1,180
7.25% Senior notes due 2013 (listed)	550	-	-	-	550
8.25% Senior subordinated notes due 2013 (listed)	481	-	-	-	481
Premium on senior and senior subordinated notes	102	-	-	-	102
Convertible preference shares	144	-	-	-	144
Finance leases - defeased	24	39	61	-	124
Finance leases	4	4	-	-	8
	2,485	43	61	-	2,589

Borrowings of €2,186 million have been reclassified from non-current to current liabilities to reflect the estimated timing of our cash flows. The group expects to repay all existing borrowings in full in August 2006. All existing borrowings will be replaced by new facilities at this date. The classification of borrowings as current liabilities reflects the expected payment date as of 30 June 2006. Under the contractual arrangements with our lenders there is no obligation to repay these amounts although it is the group’s intention to do so. Consequently, the directors are satisfied that the group has adequate resources to continue in operational existence for the foreseeable future.

Interest accrued on borrowings at 30 June 2006 is €46 million (30 June 2005: €39 million). This is included in trade and other payables.

10. Provisions for other liabilities and charges

	TIS Annuity Scheme	Onerous Contracts	Other	Total
	€’m	€’m	€’m	€’m
At 31 March 2006	135	16	74	225

Charged to consolidated income statement:
- Additional provisions	-	-	2	2
- Unused amounts reversed	(5)	-	-	(5)
Utilised in the quarter	(5)	-	(1)	(6)
At 30 June 2006	125	16	75	216

Selected notes to the condensed consolidated financial information – unaudited (continued)

10. Provisions for other liabilities and charges - continued

Provisions have been analysed between current and non-current as follows:

	31 March 2006	30 June 2006
	€’m	€’m

Current	37	35
Non-current	188	181
	225	216

11. Cash generated from operations

	Quarter ended	Quarter ended
	30 June	30 June
	2005	2006
	€’m	€’m

Profit/(loss) after tax	60	(108)

Addback:
Income tax charge	17	8
Finance costs-net	35	181
Operating profit	112	81

Adjustments for:
- Profit on disposal of property and investments	(46)	-
- Depreciation and amortisation	69	80
- Non cash retirement benefit charge/(credit)	14	(2)
- Non cash share option charges	-	2
- Non cash restructuring programme costs	-	3

Cash flows relating to prior period restructuring, business exits and other provisions	(8)	(22)

Changes in working capital
Inventories	(1)	(1)
Trade and other receivables	(18)	(24)
Trade, other payables and other provisions	24	13
Cash generated from operations	146	130

12. Related party transactions

The following transactions were carried out with related parties:

Key management compensation

	Quarter ended	Quarter ended
	30 June 2005 €’m	30 June 2006 €’m


Salaries and other short-term employee benefits (including share options)	1.2	1.7
Post-employment benefits	0.2	0.2
Share-based payments	-	-
	1.4	1.9

Purchase of goods and services

During the quarter ended 30 June 2006 eircom paid €0.1 million (30 June 2005: €0.1 million) on behalf of the ESOT for the administrative expenses incurred in its capacity as trustee of the ESOT and the APSS. All of these costs were expensed to the income statement.

Selected notes to the condensed consolidated financial information – unaudited (continued)

13. Contingent liabilities
Allegations of hearing impairment

In June 2006 the group received a letter before action in relation to potential hearing impairment claims by 56 current and former employees. The group has denied liability and awaits further details of the alleged injuries.

Contingent liabilities

There has been no other material change in our contingent liabilities in the quarter ended 30 June 2006 since the filing of the statutory financial statements for the year ended 31 March 2006.

14. Subsequent events

Offer update

On 23 May 2006 the Independent Directors of eircom Group plc and the Board of Directors of BCM Ireland Holdings Limited ("BCMIH") reached agreement on the terms of a recommended Cash Offer under which BCMIH will acquire the entire issued and to be issued Ordinary Share Capital of eircom Group plc not already owned by BCMIH. The offer is to be effected by means of a scheme of arrangement under section 425 of the Companies Act, which was approved by the group’s shareholders on 25 July 2006. The Court must now sanction in order for the scheme to become effective.

Under the terms of the Cash Offer, eircom Group plc Ordinary Shareholders (other than BCMIH) will receive €2.20 in cash for each eircom Group plc Ordinary Share held.

As part of this agreement, the group expects to repay all existing borrowings in full in August 2006. All existing borrowings will be replaced by new facilities at this date. Under the contractual arrangements with our lenders there is no obligation to repay these amounts although it is the group’s intention to do so.

Share options

The Remuneration Committee have approved the vesting of all of the outstanding share options in the ordinary shares of eircom Group plc.

Seasonality

Fixed line

eircom’s interconnection traffic volumes tend to decline during March or April and December as a result of a decline in business traffic over the Easter and Christmas holiday periods. We also tend to experience relatively higher fixed line traffic volumes in the Spring and Winter months, other than December and April of each year. We do not believe this seasonality has a material impact on our business.

Mobile

Meteor’s business tends to experience an increase in sales volumes during November and December due to the seasonal nature of its retail business. Also Meteor’s visiting-roaming revenues are seasonally significant because Ireland is a popular tourist destination during the summer.

Commitments

Operating lease commitments

The group’s operating lease contractual obligations and commitment payments were €235 million at the quarter ended 30 June 2006 (31 March 2006: €295 million). The payments due on operating leases are in respect of lease agreements in respect of properties, vehicles, plant and equipment for which the payments extend over a number of years.

Capital commitments

The group’s capital contractual obligations and commitment payments were €99 million at the quarter ended 30 June 2006 (31 March 2006: €108 million).

Commentary on results of operations for the quarter ended 30 June 2006
Overview

EBITDA from continuing operations, before restructuring programme costs, non-cash pension (credit)/charge and profit on disposal of property and investments of €162 million increased by 9% for the quarter ended 30 June 2006 compared to €149 million for the quarter ended 30 June 2005. This increase was primarily driven by contribution of Meteor to EBITDA. In fixed line, higher Access and Interconnect revenue, were offset by lower traffic revenue and higher operating costs, mainly payments to other telecommunication operators and higher miscellaneous costs.

Revenue

The following table shows certain segmental information relating to our business for the periods indicated:

In the quarter ended		% Change²
30 Jun 2005	30 Jun 2006	2005/2006
€ ‘m	€ ‘m	%